Election fever, defects call and rents on the rise

We’d love to ignore the election but we can’t, so this week we look at what our nation’s political parties are offering apartment buyers and renters as we hurtle towards polling day.

Everybody agrees we need more housing – and that means more apartments – but the policies differ, including one that an economist has dubbed “the worst economic policy of the 21st century.”

 And we look at Victoria where the state government is pushing through a no-nimby policy to force councils to accept low-rise apartment blocks.

We have a chat about Strata Community Association, the strata managers' peak body's call for national protection for apartment owners from defective buildings.

And we look why rents of apartments are rising faster than rents of houses, and where this is happening, including one holiday letting hotspot that’s been hit by a 60-night a year limit. That’s all in this week’s Flat Chat Wrap.

____________________________________________________


Flat Chat is all about apartment living, especially in Australia.
Find us on Facebook and Twitter and the Flat Chat website.
Send comments and questions to mail@flatchat.com.au.
Register to ask and answer questions about apartment living anonymously on the website.
Recorded by Jimmy Thomson & Sue Williams; Transcribed by Otter.ai.
Find out more about Sue Williams and Jimmy Thomson on their websites.

Transcript

Jimmy

Apparently there's an election on.

Sue

There certainly is, nobody could have missed that I'm sure.

Jimmy

So the various parties have been rolling out their plans for housing because that's one of the big issues at the moment.

Sue

Absolutely, it's cost of living and housing I think those are the two things that may decide the election. I guess also with people getting nervous about Trump, maybe it's just how well our leaders look like they're going to stand up to Trump.

Jimmy

Absolutely, and we're also going to talk about SCA again, election related, they're saying the government needs to do something about defects, building defects, SCA being Strata Community Association, otherwise known as the Strata Managers Cartel. Should I say that? Yeah, the professional body, that's what I meant to say, that's what I meant to say.

And there's another thing about rents. You've got some news on rents going up in areas that you might be surprised that they are going up in. And we're going to take a look at Victoria where they are bringing in new laws to make it easier for people to build low-rise buildings.

Shock horror they're going to have. Well actually it's not that horrific because Victoria has actually a history of building the highest apartment blocks in Australia. I am Jimmy Thomson, I edit the flatchat.com.au website.

Sue

And I'm Sue Williams and I write about property for Domain, the Sydney Morning Herald, the Age and the AFR.

Jimmy

And this is the Flat Chat Rap. Okay, so what are they promising us? What's the pork-barrelling politicians promising us poor people in Strata?

Sue

Well I guess let's look at the government first, the Albanese government. They're planning to grow their housing support budget to $33 billion. They're going to raise income and price caps for its Help to Buy scheme, where potential purchasers receive up to 40% of the price of a home through their shared equity loan scheme.

And they only pay that back when they sell. And for first-home buyers, Labour is pressurising banks to exclude HEX debts, you know, the student debts, from mortgage application calculations. And of course they've got their much-touted $10 billion Housing Australia Future Fund and the National Housing Accord.

And they've pledged to have 1.2 million new homes built in the next five years.

Jimmy

How have the experts in the field, apart from us, received this news?

Sue

Well I think a lot of people think the Housing Australia Future Fund, we can call it the HAFF.

Jimmy

Yes.

Sue

It's a weird acronym really, but they think the HAFF and the NHA are very positive reforms. But a lot of people think, well you know, where are the houses? We just haven't seen many coming forward.

Jimmy

Right.

Sue

Labour says yes, they're kind of well underway.

Jimmy

We're talking about apartments really, not houses.

Sue

That's right, sorry.

Jimmy

I mean I know what you mean by houses, housing.

Sue

Homes.

Jimmy

Homes, yeah.

Sue

I mean they're well underway, but they're going to take a while to come forward. And so people are starting saying, oh we're never going to get these homes really. And they haven't seen much evidence of much progress I think.

I think that's the main criticism really. And it looks as if they're going to fall short on that housing target of 1.2 million houses.

Jimmy

I think you can pretty much guarantee that. I would be more likely to put a bet on that happening than say who the next James Bond will be. Which apparently...

Sue

Daniel Craig.

Jimmy

No, well he's not going to come back is he?

Sue

Oh no, no he's not. Colin Farrell I think is the favourite.

Jimmy

Colin Farrell is a favourite.

Sue

And there's also Johnny Depp.

Jimmy

No.

Sue

No, I think he's sort of done his dash.

Jimmy

He's a bit weedy.

Sue

And how about the coalition, what are they saying?

Jimmy

The coalition are saying that it's going to allow homebuyers to access up to 40% of their super fund, up to a ceiling of 50,000 to use to buy their own home. And it also wants to reduce the mortgage surplus ability buffer to make it easier to take out home loans.

Sue

Yeah, the labourer are actually saying that they want to reduce that as well aren't they? Because at the moment it's about 3% and they want to take it down to 2%. So they may be kind of pulling the rug a little bit under from...

Jimmy

Oh, they're all competing with each other.

Sue

Well that's right. One announces a policy that the other one does too.

Jimmy

And the other one goes, oh we were going to do that, yeah. Yeah, and they promised, because this is dog whistle stuff. He's promised, Dutton has promised to cut overseas migration from 185,000 to 140,000 for two years and ban foreign investors to ease competition with locals for homes.

Sue

Which Labour actually already has done. That's just come in.

Jimmy

Right. But he's trumpeting it because, and I use the word trumpet with the emphasis on Trump. He's using this, I mean it's a wedge tactic.

Basically saying, look at me, I'm dealing with all these foreign people like the Labour Party won't. It's awful.

Sue

And what do the experts say about him? That super plan is quite controversial isn't it?

Jimmy

Saul Eslick.

Sue

Yeah, he's an independent economist.

Jimmy

He said it will go down as one of the worst plans of the 21st century. So I'm thinking that's... Don't hold back Saul.

No, he's, tell us what you really think buddy. He thinks it would simply enable those with plenty of super to buy bigger houses, while those it's aimed at helping the young first home buyers who have often saved the least super, they can't compete. So yeah, the end result will be less money for people as they grow older with a huge cost to the budget, you know, 20, 30 years down the track.

Sue

Yeah, because they won't have any savings to look after themselves. So the government will have to step in.

Jimmy

Exactly. Brett Sutton of Two Red Shoes.

Sue

Mortgage brokers.

Jimmy

Mortgage brokers. Now, can I, just before we go into what he says, Two Red Shoes, is that related to the yellow brick road?

Sue

Yes, I think it must be.

Jimmy

Like the ruby slippers?

Sue

Yes, exactly. And it's kind of catchy and stuff, but I don't know really why they've got that. Because it makes it sound like, you know, it's just thinking about rainbows.

Jimmy

We're not in Kansas anymore. He says the super policy sounds on the surface empowering, but a report by respected housing economist Professor Chris Leishman for the Super Members Council says the scheme would increase house prices by 9%. You don't want that.

Sue

No.

Jimmy

Well, you do if you're trying to sell your house, but.

Sue

Yeah, it's difficult, isn't it? Because any policy they introduce that helps people buy houses, the extra demand, because we just simply don't have enough supply.

Jimmy

That's the problem.

Sue

Just pushes up the price all the time.

Jimmy

Build more council housing. I see. What are the Greens saying?

Sue

Oh, the Greens, they've got big policies on negative gearing and capital gains tax. They'd like to cut negative gearing for anyone with more than two properties and see fresh limits imposed on capital gains tax discounts.

Jimmy

Right.

Sue

And they're also campaigning, which is a really interesting policy, for a public property developer to build 360,000 homes in the next five years.

Jimmy

Right.

Sue

And they also want to freeze rents and cap any increases, which is a bit more controversial, really.

Jimmy

And Brett Sutton's chipped in again. Yeah.

Sue

What's he saying? Yeah, he says, you know, these ideas sound really interesting. It's a kind of a huge reset of the housing market, but it would cost billions and take years and years to roll out.

Jimmy

Yeah, but don't we need a reset of the housing market? Isn't that what we need?

Sue

That would be great. But to have a public property developer, that's basically the government building a lot more houses. You know, it has enough trouble coping with the houses it's not building.

You know, it's kind of how could it end up building more houses rather than allowing developers, you know, improving the market conditions so developers can build houses? I mean, it would be great to have the government building more houses, but it doesn't have much money, means more taxes. It means more government interference in all our lives, really.

Jimmy

Is it a credible alternative? I think. The government comes in and says, we want to build two apartment blocks with 500 apartments, right?

Is there a developer out there that will come and build it for us in a way that they don't fall down? And a developer will come along and say, OK, we'll build it for you for this amount of money. And they say, right, on you go.

We've got the money. We can get the banks to give you the money. You will make a profit from this.

But we don't have to deal with, we don't have to set up the infrastructure that is required to become property developers. We are not property developers. We're the government.

But you are property developers. Here you are. Here's an opportunity.

We've got the land. We've got all the approvals that you need. Off you go.

Sue

Well, the Greens are asking for actually the government to become a property developer, really. And there is the infrastructure in place where government actually works with developers and it kind of rezones land. It offers land for sale.

So it's doing that already. But the Greens want the government to actually go into property development, I think.

Jimmy

Yeah. So one of these commentators said that the cost of red tape approvals and all this stuff is about 49% of the cost of a property bill.

Sue

Yeah, that's in New South Wales, yeah. Which is massive, isn't it, really?

Jimmy

It's huge. It's huge.

Sue

But then again, if you just strip all the red tape away, I mean, that's the difficulty.

Jimmy

You call it red tape. And for some people, that red tape is all that saves them from...

Sue

Houses falling down.

Jimmy

Houses falling down and having to...

Sue

Cracking and falling down. And also, I mean, you brought up earlier about the Victorian government introducing new legislation to allow three-story blocks being built.

Jimmy

Yeah.

Sue

And they won't need development application permission. Right. They'll just be able to go ahead, really.

Jimmy

Right.

Sue

So that's a really good example of red tape being stripped away. And yet it's proving incredibly controversial because people are saying, well, we don't want all these blocks all over the place. You know, maybe it's better to have one big block every few blocks away than to have all these little tiny blocks everywhere.

So...

Jimmy

It's the NIMBYs, you know. Our world is ruled by NIMBYs. Our world is ruled by people who don't want anything to change.

At the same time, they're saying everything's got to change.

Sue

Yeah.

Jimmy

Just not my area.

Sue

Yes, we do need three-level walk-up blocks.

Jimmy

Absolutely.

Sue

That would be fantastic. But we need them to be well-developed. We need them to be well-designed.

We need them to look good and to fit in with the neighbourhoods.

Jimmy

It's not that hard.

Sue

Well, no, because, you know, the government, the New South Wales government has got this patent book that is...

Jimmy

Yep.

Sue

You know, so that's great.

Jimmy

And some of those designs are amazing.

Sue

They are. They're really nice.

Jimmy

Yeah.

Sue

So maybe with the Victorian example, they need the patent book as well.

Jimmy

They do. They could borrow ours.

Sue

Absolutely, because I'm sure...

Jimmy

We must have a library ticket.

Sue

Great. So that's the Greens, really.

Jimmy

Right.

Sue

And obviously lots of people have said that they don't like negative gearing because it means, you know, you have a lot more investors buying houses and apartments. And they're always competing with the first-home buyers and driving them out.

Jimmy

Yep.

Sue

Yeah.

Jimmy

Have the Teals said anything? Are the Teals in there at all? Are they in the mix?

Sue

Oh, absolutely.

Jimmy

I mean, they're kind of... The Teals are originally liberals, weren't they? The coalition people who didn't like the environmental stuff.

So this feeds into the environment as well.

Sue

We actually have a Teal MP now, don't we?

Jimmy

Not that we asked for one. They just gave us one.

Sue

Our election boundaries have changed. And we were in the city of Sydney. So we had Tanya Plibersek.

Jimmy

Yeah.

Sue

And now we have moved to Willara?

Jimmy

Wentworth.

Sue

Oh, Wentworth. And so we now have Allegra Spender.

Jimmy

Yeah, which is obviously a made-up name. She's going to be the new Bond girl.

Sue

I have a pair of her sister's trousers.

Jimmy

Well, did she not want them? Will you steal them at the gym?

Sue

She said she'd sign them.

Jimmy

Oh, I see.

Sue

But it's interesting. So far, when you look at the election, just in our little area, we have probably received about 10 letters from Allegra Spender so far. And nothing from anybody else.

Jimmy

Well, I've heard nothing from Labour.

Sue

No.

Jimmy

They've given up.

Sue

No, I don't know that they have. Maybe they're taking more time to get into gear.

Jimmy

Eastern suburb elites. They have never voted for anybody else. Maybe.

I don't know. We'll see. Anyway, when we come back, we are going to talk about the Strata Community Association's call for a national standard on defects.

That's after this.

Sue

So what's the SCA nationally asking for?

Jimmy

Right. So bear in mind that SCA New South Wales, I mean, we said they were in disarray. And their president came on to the podcast a couple of weeks ago and said that wasn't in disarray.

And then a couple of days later, they made a big announcement about stuff. And I thought, oh, you are in disarray because he didn't mention this. But they said, no, no, it's just a it's just a snafu, an oversight.

So anyway, they have issued a press release and they are saying that it's time there was a national standard on defects.

Sue

All right. So SCA New South Wales is saying.

Jimmy

No, no, no. This is SCA nationally.

Sue

Right.

Jimmy

It's different. But the SCA's national president has issued a press release saying that he thinks they think that there should be a national standard for defects, pointing out that New South Wales currently has a 2% bond, which will increase to 3% in July this year.

Sue

And that's a bond where developers put that money in with the government. So that's a guarantee that if there are defects that could be used. Although 2% isn't very much, is it?

Jimmy

No.

Sue

But 3% isn't very much.

Jimmy

Well, it's 50% more than 2%. And apparently Victoria is bringing in a similar measure, about 2.5%. But the other states have nothing. And it's really alarming.

You know, the thing about Strata Community Association nationally is that every state is so different. I mean, we complain about Strata managers here, often with good reason. But then we look at Victoria and the Strata managers there, as their former state president once said, all you need is a mobile phone and a steady heartbeat and you can be a Strata manager.

Sue

That's naughty.

Jimmy

Yeah. She's no longer president. And all the different regulations, you know, up in Queensland, where the Strata managers are very active, but they're up against it up there because they've got the sale of management rights to deal with.

Sue

Which is a huge problem.

Jimmy

Such a huge problem that they kind of push it off to the side often, just so they can get on with the other stuff that is also important. And what we're not getting, I mean, OK, it would be terrific if there was a national standard on building defects. It would be terrific if there was a national standard on Strata law.

Sue

Absolutely. I mean, we, I mean, we just really need national federal standards on all these things. I mean, I think New South Wales has been really leading the way and having a really active building commissioner who changed an awful lot of things and has left a fantastic legacy.

And obviously, we've still got a new building commissioner here. And it's really shown up other states who are having to struggle with the same problems as we did here. But, you know, we've got a much better position.

We're in a much better position now than we were before. You look at Perth and Brisbane, they've all got really lots and lots of new high-rise buildings. And you kind of wonder what it's like buying in there and living in there and what it's going to be like five years into the future.

Jimmy

And one of the big problems in these areas, like most of the states have similar laws about warranties. But these days, it's a six-year warranty for building defects. But we're hearing increasingly, and I was talking to a senior civil servant in fair trading just last week.

And he said that in their current investigations into strata management in New South Wales, they're discovering a lot of complaints about strata managers who have helped developers to run down the clock on their defects. And then after the six years are up and people come into the building and say, what have you done about defects? They say, oh, you're too late.

Sue

Yeah.

Jimmy

You can't do it now. And to me, that's criminal. I think if people have done that, they should be in the jail.

Sue

Yeah. And I did a story about Victoria, about an apartment building in Melbourne the other day. And I got all these calls from people saying that there were lots of examples of lots of buildings, particularly in Melbourne, where the developers kept control of the strata committees for a long, long time.

They got themselves elected, and they kept proxies, and they were able to obscure people's views of defects until the time was up. And also, there were some bigger states with lots and lots of strata committees, because they had lots of different stratas, and people were having to pay levies to each of the strata committees, yet the developer kind of controlled all of them. And it was just absolutely incredible.

I'd never heard of that before.

Jimmy

And this is something I know that the Owners' Cooperation Network keeps trying to make inroads into Victoria, and certainly keep making noises about making inroads into Victoria. But we are yet to see any evidence. They did have a consumer group there called We Live Here, but that was set up predominantly to ward off Airbnb, which got a huge foothold in Victoria to a ridiculous level.

And that's an indication of how successful they were or weren't. And they're trying to evolve, as far as I can tell, into a group that is more concerned about the whole of strata. But I still get emails from people saying, look, you know, we've got this problem in our building, the building's falling apart.

The law says that the owners' corporation has to maintain and repair common property. Our committee just refuses to do anything about it. And they control the owners' corporation so that whenever these issues come up at a general meeting, they persuade everybody or they use their proxies to block any attempts to fix the building.

And the government does nothing. And I know you disagree with me on this, but I don't think the media does enough in Victoria to highlight these things. I mean, the main stories that I've read in the past year or two have come from ABC TV and their news website, because a lot of, as we have found for years in this state, a lot of journalists don't understand what the problems are, don't understand what the issues are.

They're too easily swayed, in some cases, by the professionals and the developers. And the consumers, the people who actually put money in, are left high and dry. And that's why it would be good to have national standards for consumer protection in Strata.

Sue

Absolutely. And very clear standards as well, because you say the media doesn't do enough. I did three stories last week and they were all, they all involved immediate lawyer threats to me.

And you kind of think, you know, it can be quite unnerving when that happens. But if there were very clear standards, it would be so much easier to be able to do stories and know that you could hold your ground. I mean, obviously I can hold my ground, but it would be much easier if the standards were much clearer as well.

Jimmy

Yeah, I won't say too much about this, but I did see one set of emails, like you were getting two or three emails a day from a lawyer who was using their, just the fact that they were a lawyer, to try to bully you into silence, threatening you with 1.7 years jail, Sue Williams.

Sue

I shall miss you, Jimmy. You will visit me, won't you?

Jimmy

I will try. I'll try. I will sneak a file in, in a gluten-free cake.

Sue

Oh my God. Let's hope it doesn't come to that.

Jimmy

Briefly before we go, how are things in the rents area, Sue?

Sue

Yeah, well, it's really interesting. The latest domain rents report has just come out and apartment rents are doing much better if you're an owner, like rents are going up in apartments more than in houses. So in Sydney, they've just gone up over the last year by 3.6% and in Melbourne, 4.5%. Right. And in Adelaide, 7.5% and Perth, 9.1%, much higher than houses. Sydney houses 3.3%, Melbourne, 1.8%, Adelaide, 5.1%, Perth, 6.2%. So apartments are going up, rents, and I think it's probably because they're much more affordable.

Jimmy

So they're coming off a lower base.

Sue

Absolutely. The cost of living is really hitting people hard. Right.

So they're looking to rent apartments rather than houses because that's all they can afford. So as a result, rents for apartments are actually going up.

Jimmy

Right.

Sue

And it's interesting because if you look at regional New South Wales, the funny thing is Byron Bay, which over the last 18 months has been going through a bit of a...

Jimmy

It's gone down the toilet, hasn't it?

Sue

Not really, but it's been a bit subdued. All right. Their rents have gone up by 10% over the past year.

Jimmy

Right.

Sue

And I talked to a few agents in Byron Bay and asked why that is. And obviously, it's still a really attractive destination for a lot of people.

Jimmy

Yeah.

Sue

But they were saying, you know, the latest legislation about Airbnb, so they have a 60 night cap in some areas of Byron Bay.

Jimmy

Yeah.

Sue

So the estate agents were saying people are taking their apartments and their houses off of Airbnb and putting them into the long term residential market.

Jimmy

Right.

Sue

But those places are often much nicer than many of the others in the long term residential market.

Jimmy

Yeah, because they've been done up for tourists.

Sue

Yes, that's right. And they might have four bedrooms. They might have a pool.

They might have a big entertaining deck. So their rents are going to be much higher. So it's actually pushing the median rent up a lot.

So that was kind of an interesting thing. I mean, it's great that they're putting them back on the residential market, though.

Jimmy

Yeah.

Sue

A lot of them are furnished.

Jimmy

Despite what Airbnb said.

Sue

That's right. Airbnb, those arbiters of truth.

Jimmy

Yeah, they said our people will not be, they'll just leave them empty and lend them to friends. Yeah. Welcome to the real world, Airbnb.

We know what you're up to.

Sue

So that's an interesting thing that has had an effect, I think, as well.

Jimmy

Okay.

Sue

Yeah. So rents are looking really healthy in terms of if you own an apartment, if you're an investor and you're renting it out. For tenants, it's kind of grim news, really.

But the good news for tenants is that the rate of growth of rents is decelerating.

Jimmy

Right.

Sue

It's going down quicker in the cities. So it's going down a little bit more slowly in the regions because they're on a lower base, as you say.

Jimmy

It's interesting what you were saying earlier about Wollongong and Kiama. Like rents have gone up in Wollongong because it's commutable distance to Sydney. So people who actually live and work in Wollongong who don't want to commute and don't want to pay the higher rents are then moving down the coast a bit to Shoalhaven and places like that and Kiama, which is commutable distance to Wollongong.

Sue

Or if you can work from home, then it's a nice place to live, really. So those lifestyle coastal places are doing pretty well, really.

Jimmy

All right. OK, well, we have covered so much ground. We've got the election sorted out.

We've got defects sorted out. We've got rents sorted out. I'm pretty exhausted.

And oh, happy birthday to you, Sue Williams.

Sue

Thank you so much. Thank you.

Jimmy

And today you got your big birthday present was a contract for another book.

Sue

Yes, that's right. What a great present.

Jimmy

Yeah, it is a good present.

Sue

But and as well, because I'm actually on strike today from the newspapers.

Jimmy

Oh, you better stop talking.

Sue

There's a freelancer strike. So I'm not on strike from your podcast, Jimmy. It's just from the newspapers.

Jimmy

I make a pretty poor picket line. You don't pay very much either. I don't pay at all.

All right. Lovely to talk to you about all things Strata. Thank you for coming down the corridor.

And thank you all for listening. We'll talk to you again soon. Bye.

Bye. 

Thanks for listening to the Flat Chat Wrap podcast. You'll find links to the stories and other references on our website, flatchat.com.au. And if you haven't already done so, you can subscribe to this podcast completely free on Apple Podcasts, Google Podcasts, Spotify, or your favorite podcatcher. Just search for Flat Chat Rap with a W. Click on subscribe, and you'll get this podcast every week without even trying. Thanks again.

Talk to you again next week.

 Transcribed by TurboScribe.ai.